What Does it Mean to Discharge Your Debt?

Discharge from your debts is the main focus of bankruptcy relief. Discharge means that there can be no further collection efforts made by creditors, as your personal liability for a debt has ended.

However, all debts are not "dischargeable", or eligible for discharge. You take your financial fresh start and full control of your bankruptcy when you are able to grasp just what the scope of your discharge is, and in your particular case, just what it means.

Determining Discharge-ability

You have to file schedules which list your creditors and your debts, shortly after you file for bankruptcy, along with other documents including a statement of your financial affairs. Your financial circumstances are documented by these filings, along with your bankruptcy relief eligibility, and also whether you might be claiming exempt from the claims of creditors any property you might have.

Creditor's Claims And Meeting Of Creditors

The court will notify your creditors, once your case is filed, telling them you have filed for bankruptcy, and also sending the necessary details for a meeting with them. This meeting will be run by the bankruptcy trustee, who will take over administration of this case. The meetings normally are fairly brief, and any creditors who attend, as well as the trustee, are permitted to ask you questions about your finances and your debts.

Notice of the meeting being served also includes for the creditors deadlines for them to file any proofs of claim they may have, and also any objections they may wish to file to your discharge, and to any claims you make regarding property exemptions.

Also, at the creditors' meeting, a permanent trustee can be named, who will take charge of and complete your case's administration. The trustee's main duties which remain are to sell your property, which the bankruptcy estate is now made up of, and then oversee all payments on the claims of your creditors.

Discharge

Once the objection to discharge deadline passes, an order for discharge is entered by the court. It will not though be entered unless you file your completion certificate of the personal financial management course which is required.

Dischargeable Debt Types

Make an assessment of your debts, and confirm they are in fact discharge eligible, when you investigate your options of bankruptcy relief. It is a major decision when you file for bankruptcy relief, and it is vital that you know just what it will do for you. You also want to be fully aware of those types of debts which are not dischargeable!

Many different common debt types are dischargeable. Depending on whether you file a Chapter 7 case, or a Chapter 13 case, there will be some differences.

Chapter 7 Dischargeable Types Of Debts

The following debts are dischargeable in a Chapter 7 case:

Liabilities under guaranty agreements

Negligence claims

Credit card account balances

Personal loans

Deficiencies existing after vehicle repossessions

Judgments against you, including car accident claims

Chapter 13 And Discharge

In Chapter 13, discharge works a bit differently. The relief is the same, and upon discharge, your responsibility for a debt does in fact end. You do have a reorganization plan in Chapter 13, and with disposable income, pay a portion of your debts. In general, in a Chapter 13 case you do keep your property, but selling some assets to satisfy debts may be included in the plans.

If you do make all plan payments, a full compliance discharge will be granted. The discharge is broad in scope, and does apply to all debts your plan provides for.

If due to no fault of your own, such as the involuntary loss of a job, if you weren't able to make all plan payments, and modifying the plan won't work, the court can grant you a hardship discharge. It will be to unsecured debts that are included in your plan, such as credit cards, that the hardship discharge will apply to.

Discharging debt will also show that you are prepared to move forward with a clean slate, having showed that you faced up to your debt issues and dealt with them directly.